Many hope that the death of a parent will bring siblings closer together, but unfortunately, this isn’t always the case. Sibling rivalry, whether it has existed for a long time or is a recent development, can often be exacerbated when a parent passes away.
Emotions are heightened and grief can cause disagreements, especially when the parent’s will does not provide equal amounts for all children.
In England and Wales, there is no requirement for parents to provide for their children on their death, nor must they provide for them equally. However, when one child is disinherited or receives significantly less than the other, it often leads to disputes over the validity of the will.
Accusations about the care provided to the parent or the motive behind the relationship can also arise, making the disputes between siblings even more emotionally charged and angry.
In this article, we’ll explain what property rights siblings have following their parents’ death. We’ll look at how the deceased’s estate is divided, and the legal rights of each sibling.
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UK sibling inheritance laws, explained
In most instances, the deceased will determine how their assets and property will be divided in their will. But if someone passes away without a valid will, the intestacy rules will decide how their estate is distributed.
This will prioritize family and friends, such as:
- Civil partner
- Grandchildren and parents.
When it comes to inheriting a property with siblings, things can be quite complex. If the parent passes away without a valid will, their estate will be handled according to the
Rules of Intestacy. This means that all relatives, no matter their age, relationship, or estrangement, are put on a priority list.
Unless someone challenges the Inheritance (Provision for Family and Dependents) Act 1975, the estate will be distributed equally among the children of the deceased.
If your siblings and you are named as joint beneficiaries of your parent’s property in the will, it is best to agree between yourselves first. If disputes arise, they can take a long time to resolve and be costly.
Thus, it is better to try to agree on things beforehand to save time, money, and stress.
Siblings who jointly inherit a property
Three main options to consider:
- Keep the property. It could be beneficial to keep it as a residence, rent it, or set up a timeshare agreement, depending on the individual situation.
- Selling the property may mean losing a home with sentimental value, but it is usually the simplest option, allowing siblings to split the proceeds equally. If the property has an existing mortgage and none of the siblings can afford to co-own or take out a second one, this is the best option.
- If one sibling wishes to stay in the property, they can buy out the others or receive an equal share of the profit when it’s sold. Alternatively, one sibling can buy out the others and rent or keep the property as a second home.
Inheriting a property usually brings a lot of complicated decisions. Sometimes, one sibling is living in the property and refuses to move, or one sibling wants to sell while the other does not.
If the siblings can’t agree, the one who wants to sell can petition the executors to force a sale through the Trusts of Land and Appointment of Trustees Act 1996.
Family life doesn’t always look the same. When adopted children or step-siblings are involved, questions can arise. Just like biological children, those who are adopted have the same rights under the Rules of Intestacy.
Provided they are legally or biologically a child of the deceased, they are entitled to a legal stake in the property.
- Stepchildren and foster children, however, are not recognised under the Rules of Intestacy. This can lead to complications when divvying up an estate. If these children have been left out of the Will, they have no legal claim to the property.
- If there is a biological child with a step-sibling, the biological child has a legal right to the property over them. This might not stop the step-sibling from taking legal action to secure their stake in the assets.
In some cases, biological siblings might still recognise their step/siblings as family and include them when deciding what to do with the inherited property. If some, or all, of the children inheriting their parents’ property are under 18, the same rules and options apply.
However, the beneficiaries will only get access to the funds from the sold property once they turn 18.
Younger siblings might be content to let their older siblings take the lead on what to do with the property, but this does not change the fact that they have an equal stake in whatever money is made from the result.
I Have to Pay Inheritance Tax on My Parents’ House?
If the value of the deceased’s estate – including their property, finances and possessions – is below £325,000, usually there is no inheritance tax to be paid.
However, if a parent gives their home to their adopted, foster or step-child, the tax-free threshold will increase to £500,000. If the estate is worth more than the relevant threshold, you will be liable to pay the standard inheritance tax rate of 40%.
For example, if your inheritance is worth £650,000, you can get £500,000 tax-free. This means you will only pay tax on the remaining £150,000. At the 40% rate, this would be £60,000. You must pay the tax due by the end of the sixth month after the person dies.
If your parents passed the property onto you before they died, there would be no inheritance tax to pay, as long as either they paid you rent and bills for seven years or they moved out and lived elsewhere for seven years after the transfer.
How Do I Avoid Capital Gains Tax on Inherited Property in the UK?
Capital Gains Tax (CGT) is only payable when you sell a property – not if you inherit it. Your primary residence is exempt from CGT.
If you inherit a property and decide to sell it, CGT will be due on the amount that the property has appreciated since you inherited it, minus the Capital Gains Tax-free allowance of £12,300 (or £6,150 for trusts).
For example, if you inherit a property worth £250,000 and then sell it five years later for £325,000, you will have to pay CGT on £62,700 (sale price minus inheritance value and tax-free allowance). Residential properties are taxed at a rate of 28%.
The best way to avoid paying CGT or to minimise the amount is to sell the property as soon as the probate process is completed. While you cannot legally sell a property during probate, you can advertise it, conduct viewings and agree on a sale price with a buyer.
If you sell the property immediately after probate is granted, the property’s value is unlikely to have increased since you inherited it, so there should be no CGT or very little to pay.
If you need to sell your house quickly to minimise CGT, we can help. Just fill out our short online form and we will be in touch within 24 hours to discuss your free, no-obligation cash offer.
Is It Better to Sell or Rent an Inherited Property?
Deciding what to do with an inherited property can be tough. Should you sell and pocket the cash, or keep hold of it to benefit from any future appreciation and a secondary income?
The latter may sound desirable, but it comes with its stresses and can take up a lot of your time.
Plus, you’ll need to make sure you have enough money to cover the mortgage (if any) and the upkeep of the property during times when it’s not rented out. If the house was inherited jointly by siblings, dealing with a rental can be difficult to coordinate.
Selling the property would mean you can easily split the proceeds and move on with your lives. This could be especially beneficial if the house had a strong emotional connection, as it can be hard to let go in the short-term but ultimately less draining in the long run.
Selling an Inherited Property: A Checklist
We’ve given you a lot of data in this article. It might be overwhelming when considering all the different choices and steps to take.
To help guide you through the process of what to do when inheriting a property and selling it, here’s a summary checklist:
- Secure and insure the property
- Notify utility companies and the council
- Estimate the value of the property
- Go through the probate procedure
- Pay any inheritance tax due
- Decide if selling is the right option
- Finish any repairs or renovations
- Get a solicitor or conveyancer
- Advertise the property
- Hold viewings
- Assess offers
- Accept a bid
- Do surveys and searches
- Exchange contracts
- Finalise the sale
- Pay capital gains tax, if applicable
The probate process can take a while, especially if there are issues like an invalid will or trouble finding an executor. As you can see, selling a probate property involves a lot more steps than selling a normal house.
How can I sell an inherited house quickly?
If you need to make a quick sale on an inherited property and want to move on with your life without the stress of viewings and the delays of the open market, we can help. We specialize in fast and easy house sales, providing full visibility throughout the process.
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